Correlation Between Vanguard Energy and Victory Integrity

Can any of the company-specific risk be diversified away by investing in both Vanguard Energy and Victory Integrity at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Energy and Victory Integrity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Energy Index and Victory Integrity Smallmid Cap, you can compare the effects of market volatilities on Vanguard Energy and Victory Integrity and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Energy with a short position of Victory Integrity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Energy and Victory Integrity.

Diversification Opportunities for Vanguard Energy and Victory Integrity

0.85

Correlation Coefficient

Vanguard Energy  Victory Integrity

Very poor diversification

The 3 months correlation between Vanguard and Victory is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Index and Victory Integrity Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Integrity and Vanguard Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Energy Index are associated (or correlated) with Victory Integrity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Integrity has no effect on the direction of Vanguard Energy i.e., Vanguard Energy and Victory Integrity go up and down completely randomly.

Pair Corralation between Vanguard Energy and Victory Integrity

Assuming the 90 days horizon Vanguard Energy Index is expected to generate 0.64 times more return on investment than Victory Integrity. However, Vanguard Energy Index is 1.57 times less risky than Victory Integrity. It trades about -0.15 of its potential returns per unit of risk. Victory Integrity Smallmid Cap is currently generating about -0.23 per unit of risk. If you would invest  6,607  in Vanguard Energy Index on October 10, 2024 and sell it today you would lose (441.00) from holding Vanguard Energy Index or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard Energy Index  vs.  Victory Integrity Smallmid Cap

Vanguard Energy Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Energy Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Victory Integrity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victory Integrity Smallmid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Vanguard Energy and Victory Integrity

The main advantage of trading using opposite Vanguard Energy and Victory Integrity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Energy position performs unexpectedly, Victory Integrity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Victory Integrity will offset losses from the drop in Victory Integrity's long position.

The idea behind Vanguard Energy Index and Victory Integrity Smallmid Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.